A. Accountable Care Organizations

ACOs are groups of health providers who get waivers of rules on competition and kickbacks. They also may get paid more if they reduce spending on their Medicare patients, and sometimes patients of other insurers.

Patients do not sign up. Medicare tracks 9 million patients who get most of their primary care from an ACO. Medicare shelters ACOs from antitrust rules. When an insurer saves money on ACO patients, the ACO can keep half the savings, but when the insurer pays more for ACO patients, the ACO often keeps all the extra income. There were 32 million patients overall in ACOs, Medicare plus private, on 3/31/2017, 10% of the US population. A recent JAMA article maintains the myth that ACOs' goal is cutting costs, rather than reducing competition, and reducing care for expensive patients.

When you reach the list, you can get it as a spreadsheet by clicking the pale blue "Export" button in the upper right corner. I did this and added other information: aco2017.xls

Before Medicare provided that list, I had an earlier list of ACOs (or spreadsheet), updated to 2015, based on Medicare press releases here. It includes some quality measures from here, but is not as up to date as Medicare's list.

Health providers who join an ACO have incentives to refer to affiliated specialists so payments are kept within the group. Quality measures slightly discourage hospital admissions (pp.13-15) and readmissions (p.11), but if the doctors' practice is owned by a hospital, extra income for the hospital more than makes up for any quality measures. They face no loss from patients' deaths or from diseases getting worse.

Patients are poorly informedabout which doctors are in an ACO, and about their doctors' incentives. Medicare took three years to answer my request for some of this information under the Freedom of Information Act.

A doctor in California, Dr. Weinmann, has written several times about hospitals' and ACOs' power over doctors, "if Physician A has ordered diagnostic testing and treatment averaging $25,000 per patient while Physician B has made the hospital or foundation pay $50,000 per patient, the physician who made his plan pay twice as much for patient care is less likely to be offered a renewal contract."

A retired urologist in Minnesota, Dr Geist, has written that ACO doctors are “double agents playing the dual role of caregiver and insurance underwriter"

ACOs can monitor their referrals to outside specialists and choose specialists based on costs, outcomes and patient satisfaction. Patients can go elsewhere but most follow the referral, thinking that quality is the main or only criterion.

According to Medicare, patients who don't want a doctor with ACO incentives and pressures can "seek care from another provider." If they want to keep their doctor, they can avoid cuts by dropping Medicare part B doctor coverage and using other insurance, or they can accept that the doctor has incentives to recommend less expensive treatments and hospice. They can get second opinions from doctors who have not joined an ACO, who will have less incentive for cost cutting.

"20 percent of patients generate 80 percent of the costs... if I were a [heart failure patient], I would see a heart failure specialist. If I were an advanced type II diabetic, I would go to the Joslin Diabetes Center, not a primary care provider."

Patients need "provider organizations that deliver highly specialized care for a certain group of patients, such as those who have diabetes, cancer, or congestive heart failure. You need specialists for that. They are the opposite of organizations, such as ACOs, that do everything for everyone."

Dr. Prince, CEO of Beacon ACO in New York, presciently said before Beacon became an ACO, "If they’re going to put the risk back on to the ACO and onto the physician, it’s going to be more difficult and we could start self-selecting which patients we want to include in our ACO." High cost patients can get more care outside an ACO.

61% of doctors plan to stay out of ACOs. 24% were members in January 2014, with another 10% planning to join in 2014. 91% of kidney dialysis patients are not in ACOs, so Medicare is setting up other doctor groups (End Stage Renal Disease Seamless Care Organizations - ESCO) just to cut costs for dialysis patients. "Members must place their fiduciary duty to the ESCO before the interests of any ESCO participant."

Medicare patients who use an ACO doctor cannot opt out as long as they have Medicare Part B, though they can opt out of letting that doctor see their Medicare claims from other doctors. (42 CFR 425.708). ACOs can maximize their inexpensive patients by reminding them to come in for checkups.

"it is important to keep our healthiest (least expensive) patients active and engaged. Reaching out to these patients allows a practice to generate revenue and offer preventive or wellness opportunities to patients. In addition to the benefits to the practice, there are organizational benefits as well. Maintaining the attribution of these lower cost patients to our population pool acts to depress our overall spend while we deliver high quality care."

B. Antitrust, Investment and Power

ACOs are largely sheltered from restrictions on antitrust, kickbacks, and referrals to financially related providers

The reason many hospitals are at the center of ACOs may be these waivers of referral and antitrust rules, resulting in higher, not lower costs.

The government says, "The multiplicity of waivers is intended to afford flexibility to ACOs in varying circumstances."

If they were not sheltered, violations could cost ﻿hundreds of millions﻿ in lost income and penalties (Drakeford v. Tuomey), so the ACO shelter is supremely valuable.

The government is also trying to loosen privacy on substance abuse, to ease the efforts of ACOs to share information on patients.

An April 2011 editorial in the New England Journal of Medicine (NEJM) said most medical groups spend money to set up an ACO, and cannot profit from it, unless they cut costs 20% or more. The large number of ACOs, all signing up after the editorial was published, shows managers want the kickbacks, referrals and antitrust waivers described above, or expect to cut spending on your care at least 20%, neither of which is desirable.

A July 2015 study in Annals of Family Medicine found that primary care doctors received very little pay for quality, whether they were in ACOs or not:

A quarter got all their compensation based on the services they billed ("productivity").

A quarter got all their compensation from straight salary (no word how it was set)

The rest had a mix. ACO doctors' compensation averaged 49% from salary, 46% based on billable services, 3% based on "quality", and 1.5% other, almost the same as non-ACO doctors.

The study had a 50% response, and excluded solo practices.

​There is a revolving door between ACOs and the federal Department of Health and Human Services.

The so-called "most influential" physician executive in the country moved from senior manager at Geisinger (part of Keystone ACO), to director of Medicare's Innovation Center, to CEO of CHE Trinity Health, which is part of 5 ACOs and is forming 11 more, and is carefully navigating anti-trust rules in Michigan.

Another executive moved from manager of a NY program using commercial electronic health records, to federal coordinator of health records, to a company setting up and managing ACOs. He took a key executive with him from the federal government. (Under his leadership as federal coordinator, electronic records expanded rapidly in hospitals and doctors' offices, without adequate security.)

​HOSPITAL POWER AND COST

A January 2012 discussion reported in the Wall Street Journal included a former Medicare administrator, Scully, saying ACOs would not work and would be dominated by locally powerful hospitals forming ACOs. "The biggest flaw with ACOs is that they are driving more power to hospitals—not to doctors. Very scary, and I am a hospital guy. The goal of ACOs was to organize doctors to focus more on patients and keep the patients out of hospitals. Instead, doctors are selling practices to hospitals in droves." A Virginia professor, Goldsmith, said ACOs had been tried 2005-2010 and failed, the same pattern noted by NEJM.

The professor, Goldsmith, also has written, "Hospitals and systems that became powerful in the marketplace through mergers and acquisitions aggressively shifted costs onto private insurers." Austin Frakt, a VA health economist and Boston professor writes, "If ACO formation proceeds with few checks... lower public-sector costs but higher private-sector premiums" are likely.

​In fact integrated health care delivery networks (IDNs) raise both public and private costs. A 2015 study found "there is growing evidence that hospital-physician integration has raised physician costs, hospital prices and per capita medical care spending... Diversification into more businesses is associated with negative operating performance. This is consistent with the management literature, which shows that diversification increases a firm’s size and complexity, in turn increasing its cost of coordination, information processing, and governance/monitoring."

​A 2017 report says, "Not only did sixty drug companies combine into ten, but hospitals, outpatient facilities, physician practices, labs, and other health care providers began merging vertically and horizontally into giant, integrated, corporate health care platforms that increasingly dominated the supply side of medicine in most of the country... Even nominally independent surgeons, for example, can’t stay in business if the only hospital in town won’t grant them admitting privileges, or if it grants “affiliated” surgical teams better terms... A full 40 percent of all hospital stays now occur in health care markets where a single entity controls all hospitals... not a single highly competitive hospital market remains in any region of the United States."

Hospitals are rapidly buying doctor practices, so the doctors become employees and refer patients to the hospitals, not necessarily saving money, but strengthening the hospital.

A November 2012 article in the New York Times, supported by hundreds of comments from doctors and nurses, reported on hospitals buying doctor groups, raising prices, pressuring doctors to maximize billings, then paying doctors bonuses if they discharge quickly, after the hospital earns its flat payment for the diagnosis.

Only 53% of employed doctors think patient care is better from employed doctors than self-employed doctors.

Over half get pay based on their productivity or profits, rather than straight salary, and 39% of these are dissatisfied with their productivity targets.

90% of hospitals hired temporary doctors in 2013, up from 74% in 2012, to fill in for doctors who quit or went on vacation.

Some doctors leave hospitals when the employment contract becomes unsatisfactory.

C. Bonus to ACO for Cutting Costs

An ACO gets a bonus payment of up to 50% of the cost savings from Medicare Parts A and B for its patients. By 2015, half the ACOs have raised Medicare's costs, an average of 3%. The other half of ACOs have cut costs, an average of 4%. Among all 392 ACOs, 30% cut costs enough to earn a bonus. The bonus received by these ACOs averages 3% of their costs. During 2014 there were 353 ACOs, and a quarter, 97, saved enough money to get bonuses, though not necessarily enough to pay back the set-up costs. During 2012, the initial year, there were 114 ACOs, and a quarter, 29, saved enough money to get bonuses.

A rational ACO with professional management knows these 30% odds of getting a 3% bonus, which seems so small that it is unlikely to be the reason for forming an ACO. The other main benefit of an ACO is obtaining federal waivers.

Three ACOs have signed up for a version of the program where they can get up to 60% of the savings, but they share losses. One cut costs 17% (third biggest cut in the country), giving them a 12% share. One cut costs one percent, and the other raised costs half a percent, not enough to share. They have an incentive to avoid expensive treatments, which give them losses.

Theoretically bonuses can be large, so some ACOs may cut aggressively, like the one which cut costs 18%. Five small ACOs (average 7,000 patients) in Florida and Texas cut costs over 15%, averaging $1,000 per patient.. A cancer practice saved $1,000,000 per year per doctor, without even signing up for an ACO.

Detailed steps and definitions for calculating cost savings are in another section.

Each year some doctors and patients in any ACO will chance to have above-average costs, reducing the bonus for everyone else. How will the ACO and peer pressure penalize these doctors and their sicker patients? The articulate Dr. Prince, CEO of Beacon ACO, says about their doctors,

"We’ll have data and see who the outliers are, and there are teeth in the agreement," he says... "If we do go down the road of the ACO, everyone needs to be rowing in the same direction. It won’t make sense to be a high utilizer and gaming the system."

The AMA has an article about the difficulties in distributing bonuses. Another AMA study found little connection between ACOs and expenses: 62% of ACO doctors' costs were on non-ACO patients. 68% of specialist visits by ACO patients were to non-ACO doctors. 33% of ACO patients were assigned to 2 different ACOs in 2 successive years. An AMA study as long ago as 2009 said, "the results from this study call into question the wisdom of pay-for-performance programs and quality reporting initiatives that focus on differentiating the value of care delivered to the Medicare population by primary care physicians."

D. Changes in the Bonus

The bonus percentage, up to 50% or 60%, depends on quality scores. ACOs get a few percent for each quality standard they meet (if 2-sided, you would increase each percent below by a fifth, so they total 60%).

Tonya Saffer of the National Kidney Foundation says, "Quality measurement is not exactly where it needs to be yet. We need true outcomes measures that are associated with morbidity, mortality, and patient quality of life."

2 columns show how the bonus is calculated before and after the changes were adopted. Click on the table to obtain links to the definitions.

Within each measure, the ACO gets only partial points if it is below the 90th percentile (p.67899, see graph below), so most will not get the full 50% (60%) of cost savings. Many of the screening standards are so easy that ACOs and other doctors will be clustered closely. The circulatory and hospital admission standards are the main "quality" measures where ACOs may distinguish themselves.

Penalties for readmissions after a nursing home stay will reduce the number of good nursing homes willing to accept risky patients, as well as deterring needed hospital treatment. More discussion and evidence are in the Nursing Home section.

Electronic health records are problematic, since they have enabled vast breaches of medical privacy for 30,000,000 patients. Great systems are rare, though ideally they would show key information clearly in the way that each clinician needs it. Bad systems are not read by clinicians, are full of errors, generate erroneous prescriptions, and interrupt doctors when listening to patients.

Checking medications at an office visit is problematic, since hospital stays are the main cause of prescription changes, and the office visit is too late. Medicare says (p.19), "28% of chronic medications were canceled" during hospital stays, so immediate coordination is important and needs to be required. Office checks are also incomplete, since the patient rarely knows what medicines are given at the dentist, dermatologist, dialysis center, chemotherapy session, and other specialist locations.

E. Medicare Worries that ACOs Will Hurt Health

Medicare has a ceiling to protect patients from doctors' excessive cost-cutting incentives. (pp.67935-6). They worry if the ceiling is adequate.

The reward is limited to 10% of the baseline total Medicare spending on their patients (15%, if 2-sided). So an ACO gets the lesser of 10% of total Medicare spending or 50% of savings.

Medicare originally proposed the reward ceiling at 7.5%, not 10%, to avoid "an overly large incentive such that an ACO may be encouraged to generate savings resulting from inappropriate limitations on necessary care" (p.67935).

The industry cited the NEJM editorial mentioned above, and said it needed a bigger ceiling than 7.5% in order to invest in setting up ACOs (pp.67935-6). Which means the industry expects to hit the ceiling. Medicare gave them the higher ceiling.

ACOs which earn savings at the maximum 50% rate will hit the ceiling when they cut 20% of Medicare spending on their patients (50% of 20% is 10%)

ACOs with median quality scores earn 35% of savings and will hit the ceiling when they cut 29% of Medicare spending (35% of 29% is 10%)

ACOs willing to risk the lowest quality scores (30th-40th percentiles) earn 27% of savings and will hit the ceiling when they cut 36% of Medicare spending (27% of 36% is 10%)

As noted above, industry comments to Medicare show they want to reach the ceiling, so they hope to cut costs the full 20%-36% allowed by the ceiling (30%-55%, if 2-sided).

Medicare says, "Many health care researchers believe that the rate of unnecessary health care is more than... 10 percent" (p.67935). They did not say how many researchers believe the rate of unnecessary health care is 20% to 55%. Patients who think 20-55% of their own health care should be omitted can go to ACOs, knowing these doctors have incentives to reduce spending that much.

The first graph below shows what fraction of the theoretical bonus an ACO gets, depending on its quality ranking (p.67899). The second graph shows threshold savings ACOs must reach to earn any bonus (p.67928-9). Large ACOs need to save 2% to earn any bonus, while small ACOs need to save at least 3.9%, to avoid payments for random variation. (ACOs which risk losses need 2% savings regardless of size.)

A doctor with a $21 million grant from Medicare to achieve "lower costs with better outcomes" says "Significant improvements in cost and quality may not be felt until fee-for-service falls below 50% of provider reimbursement," which means a ceiling on bonuses not 10%, but over 33%, leaving 33% for Medicare and 33% in direct costs, which is far too little to pay for needed care.

From a doctor's point of view, doctors are subject to "whatever cost-savings techniques the ACOs use, e.g., not accepting doctors who have too many elderly patients or patients with expensive chronic diseases. The days of searching out rare and unusual diseases to care for are over: these unfortunates will be obliged to find whatever comfort is available under the nearest bus. If the ACO is well managed from a fiscal perspective, providing participants will share in the savings as a second source of income. Quietly, with as little fanfare as possible, physicians and hospitals will be encouraged to avoid the sickest, oldest, and most complicated patients."

F. Cancer Doctors Worry ACOs Will Hurt Health

Cancer doctors have been especially concerned about quality and cuts, since cancer represents 1% of patients and 10% of medical costs.

Dr. Cary Presant, chair of the Medical Oncology Association of Southern California, said, "The unspoken word is 'try and find a way to get these patients to not utilize these drugs, and consider whether this patient who is going to be a big expense should go into a hospice earlier rather than later.'" Groups can also discourage expensive patients by limiting their appointments or recommending palliative care.

Case Western researcher, Anish Mehta, and Dr. Roger Macklis, a Cleveland Clinic cancer doctor write, "cancer-specific guidelines are not included in the quality measurements... Oncologists may feel pressured to curb the use of costly drugs and expensive procedures. New treatments from across all branches of oncology—from proton therapy to hyperthermic intraperitoneal chemotherapy to sipuleucel-T—will now reﬂect directly on the PCP... Pathway-driven medicine may lead to bare-bones cancer care, significantly reducing the universe of treatment options used by specialists."

A cancer lobbyist, Matt Brow, wrote, "There is another great risk that the ACO will not be held to delivering quality oncology care in any way, leading to the desire to see oncologists use the least costly type of therapy or no therapy at all.”

At the same time Medicare creates a shortage of cancer doctors by not training as many as the number retiring.

Gainsharing Civil Monetary Penalty (CMP) has been amended so it no longer needs waivers in or out of an ACO. It now prohibits hospitals from paying doctors to limit medically necessary care for Medicare or Medicaid patients.

The waivers let hospitals and doctors in an ACO reward doctors for referring to certain specialists and hospitals, even if the doctor thinks the best referral would be somewhere else, as long as the ACO says they advance any "one enumerated purpose... we continue to define the purposes of the Shared Savings Program...

promoting accountability for the quality, cost, and overall care...

managing and coordinating care...

encouraging investment in infrastructure and redesigned care processes for high quality and efficient service delivery for patients... we continue to interpret the purpose of “efficient service delivery” to include, among other things, appropriate reduction of costs to, or growth in expenditures of, the Medicare program, consistent with quality of care, physician medical judgment, and patient freedom of choice."

ANTI-TRUST

The Justice Department has issued policies protecting ACO members from anti-trust enforcement if they cooperate in an ACO with up to 30% of the local market.

Many doctors, hospitals, therapists, etc. have joined Accountable Care Organizations (ACOs). These have important features which patients need to understand. However Medicare does not let ACOs tell patients about some features, and requires very unclear wording for the others. ACOs cannot write their own wording:

ACOs have waivers of the usual federal rules prohibiting payments for referrals and requiring free and open competition among medical providers. Patients are not told about the waivers at all.

ACOs may not list individual doctors participating in the ACO, if they belong as a group; only the group name can be listed, which patients may not recognize. It is thus hard to do a web search to see if your doctor belongs to an ACO. Patients need to ask the office whenever making an appointment, which seems impractical.

ACOs may not tell patients about contract terms between doctors and ACOs, "public disclosure shall not include the financial or economic terms of the arrangement.". Contracts also silence doctors if the ACO disapproves treatment, "contract language that physicians are precluded from discussing disagreements about compensation 'and other matters' with patients. The treating physician is told in contractual language that where 'disagreement cannot be resolved ... under no circumstances shall such disagreement be expressed to the Enrollee.' "

ACOs have a 30% chance of getting a small bonus if they cut spending on patient care. Medicare requires patients be told the focus is quality and coordination, "The ACO may share in any savings that result from providing you with high quality and more coordinated care."

Medicare and ACOs talk about quality care, without saying they ignore deaths, cures, or good or bad outcomes from most treatment (more in C.2, below).

Medicare reveals all of a patient's Medicare claims and diagnoses to each ACO the patient goes to. The patient can stop some but not all disclosures, as described in the following paragraphs:

"You may not have to fill out as many medical forms that ask for the same information.

Each of your doctors will not only know about the health issues they’ve treated, they will have a more complete picture of your health through talking with your other doctors."

Medicare has also prepared a notice which is supposed to be available in doctors' offices upon request, and the ACO may mail it to patients if the ACO chooses to. If not mailed, the only hint of its existence is on p.119 of Medicare and You Handbook, which pretends it has the same limited information as the sign, so people who can read the sign would have no reason to ask: "A poster with information about your doctor’s participation in an ACO will be displayed. At your request, the doctor will also give you this information in writing." This notice describes the loss of privacy. It is the only place which says patients cannot stop all disclosures, and that a patient's private information can go to several ACOs.. Patients have to ask for and hold onto this paper, since it was not on the web (until I got it by FOIA):

"information will include things like dates and times you visited a doctor or hospital, your medical conditions, and a list of past and current prescriptions...

your information may also be shared with other ACOs in which any of your doctors or other healthcare providers participate.

If you don’t want your information shared with these other [sic] ACOs, follow the instructions below...

Even if you don’t want Medicare to share your personal information with us or with other ACOs for coordinating and improving the quality of your care, ... Medicare may share some of your personal health information with ACOs when measuring the quality of care given by healthcare providers at ACOs."

Medicare's FAQs, which are on many ACO websites, say the ACO will get metadata about your diagnoses, prescriptions and appointments:

"Medicare will share information about your medical information [sic] with your doctor’s ACO, including medical conditions, prescriptions, and visits to the doctor...

you may choose to have your name and other personal information removed from the information that Medicare shares with your doctor... [if not], your medical information will be shared automatically."

"doctors and hospitals will share information and coordinate your care...

your doctors will get your medical information from Medicare to help them to know your medical history, including your medical conditions, prescriptions, and visits to the doctor

B. NOTICES AND SIGNS AT THE POINT OF CARE

A patient arriving for an appointment may or may not suddenly see a sign that the doctor is in an ACO, with minimal explanation. Medicare's theory is that the patient can "seek care from another provider". The patient is supposed to decide suddenly whether to see the doctor, based on minimal information, often sick and in pain, and maybe facing a cancellation fee.

The ACO must "Notify beneficiaries at the point of care" and "Post signs in their facilities to notify beneficiaries" "that their ACO providers/suppliers are participating in the Shared Savings Program." (42cfr425.312(a)).

"there will be a limited number of locations in each ACO in which the signs will need to be posted..." (Federal Register 11/2/11 p.67946)

The ACO must "Make available standardized written notices regarding participation in an ACO and, if applicable, data opt-out. Such written notices must be provided by the ACO participants in settings in which beneficiaries receive primary care services." (42cfr425.312(a)(3)).

On June 8, 2016 Medicare gave me these standardized written notices and signs, which must be displayed to patients when they get care. I had requested these copies under the Freedom of Information Act in July 2013. They include:

A sign to post (8.5 x 11 inches, 12-point type; such signs on the wall are very hard to read with bifocals)

​Based on Medicare's rules, patients may have no effective notice. ACOs are permitted to mail notices to patients in advance. Otherwise patients will only learn about the ACO "when you visit the office. A poster with information about your doctor’s participation in an ACO will be displayed. At your request, the doctor will also give you this information in writing" (p.119 of Medicare and You Handbook, 2017, emphasis added). The poster/sign does not say that written information is available. The sign just says you can talk to your doctor or Medicare about it. Medicare in 2014 proposed making the sign more complex, with information on opting out of data disclosures (p.72789, 12/8/14), but the final rule (6/9/15) did not state whether they would change the sign, and disclosures are still not mentioned in the sign released in 2016.

"An ACO is a group of doctors, hospitals, and health care providers working together" [sign says they "voluntarily work together"]

[goal is] "high quality, more coordinated service and care."

"doctors and primary care providers to communicate more closely with your other health care providers"

"ACOs may share in the savings it achieves for the Medicare program"

"spending health care dollars more wisely"

"You Can Still Choose Any Doctor or Hospital"

"Your doctor may recommend that you see particular doctors or providers"

"Medicare plans to start sharing information with us about your care... dates and times you visited a doctor or hospital, your medical conditions, and a list of past and current prescriptions. "

"shared only with people involved in giving you care."

"your information may also be shared with other ACOs in which any of your doctors or other healthcare providers participate"

"you can ask Medicare not to share information with us or with any other ACOs for care coordination and quality improvement purposes by doing one of the following"

"we need to get your decision by" [date, to prevent data sharing]

"you may choose to stop this information-sharing at any time in the future"

"Medicare will still use your information for some purposes, including certain financial calculations and determining the quality of care"

"Medicare may share some of your personal health information with ACOs when measuring the quality of care given by healthcare providers at ACOs."

"If you have questions or concerns, you can call [the ACO], make an appointment to see your doctor or primary care provider, or bring it up next time you’re in your doctor’s office."

"You also can call 1-800-MEDICARE and tell the representative you’re calling about ACOs, or visit www.medicare.gov/acos.html."

The main topics in these 19 points from Medicare are:

Revealing confidential medical information is the focus of items 1, 5, and 10-17.

The ACO's organizational structure, which may direct referrals to particular doctors, is the topic in items 3 and 9. However the material does not mention that doctors in ACOs can get kickbacks from referrals and can refer where the ACO doctor has a financial interest. Medicare approved waivers of referral and kickback rules for ACOs. So Medicare patients in ACOs are no longer protected by normal rules against kickbacks and "self-referrals," where the doctor has a financial interest. Furthermore, the Justice Department has issued policies protecting ACOs from anti-trust enforcement, similarly left unmentioned in the written material.

Medicare mentions quality of care in items 4 and 7. Medicare has a narrow and changing concept of the ﻿quality measures﻿ it looks for. The patient is not given any link or place to see what Medicare means by quality.

The ACO's incentive to cut costs is mentioned in items 6 and 7, without mentioning:

ACO's "share" in savings can be up to 50% in most ACOs

A few ACOs can lose money when they give expensive care to patients, which is a further incentive to economize

Readers will decide for themselves whether Medicare's wording covers what patients need to know. On the other hand, ACOs cannot decide for themselves. Medicare requires ACOs to use Medicare wording when giving information about the ACO (42cfr425.310(c)(1)), so they keep tight rein on the public spin about ACOs. However non-ACO members are not constrained in what they publicize.

C. REQUIRED WEB PAGE

Medicare requires ACO websites to have a page or pages showing staff, quality measures and "Shared Savings/Losses" (Public Reporting Format), though the web page does not have to be linked from anywhere, and sometimes can only be found if you know to search for it. Some also have an older page about "How Shared Savings Are Distributed." The examples below are from the biggest ACO, but Medicare requires every ACO to have the same wording.

1. ACOs usually include group practices, and the required web page must list them by corporate name, like "Access Neurocare PC," not the individual doctors who work there.

2. Medicare and ACOs talk about quality care, but the quality standards do not measure deaths, cures, or good or bad outcomes from treatment. Patients will not realize how limited the quality measures are, since quality measures shown to patients must use Medicare's opaque wording, such as:

They do not say what the numbers mean, whether bigger numbers mean better or worse care (they vary), nor what the range is in different areas. . They also show other numbers labeled as "Mean performance rate (SSP-ACOs)" without saying SSP means a comparison to all Medicare ACOs (Shared Savings Program). ACOs are not allowed to clarify these labels.

3. On this same obscure web page Medicare requires ACOs to tell patients the how many millions of dollars are "Shared Savings/Losses" without definition, and without context on how this compares to total spending. For example:

"Agreement period beginning 2012, Performance Year 2015: $33,537,591"

Medicare does not let ACOs tell patients that the ACO doctors can get paid more by using the cheapest treatment, rather than the one most likely to work quickly, and by referring patients to specialists who avoid expensive treatments.

About 30 ACOs are PioneerACOs (Phase 0 in list) with even stronger incentives to save money than the more common "Shared Savings." Differences include:

"The first two years of the Pioneer ACO Model are a shared savings payment arrangement with higher levels of savings and risk than in the Shared Savings Program.

"Starting in year three of the initiative, those organizations that have earned savings over the first two years will be eligible to move to a population-based payment arrangement and full risk arrangements that can continue through optional years four and five.

"Pioneer ACOs are required to develop similar outcomes-based payment arrangements with other payers by the end of the second year..." (Fact Sheet 9/12/2012 pp.6-7) "50% of all revenues must be in ACO-like arrangement." This is significant only if Medicare less than 50% of their business. Medicare especially wants state Medicaid agencies to sign up (MedPAC 4/2013 p.11, details in Request for Application pp.13-14)

Pioneer ACOs do not have to exclude spending on patients above the 99th percentile, if they want to cut such spending among their patients. (Request for Application p.13)

Emphasis is added: cost-saving incentives are stronger in Pioneer ACOs than others, and non-Medicare patients will face the same pressures as Medicare patients for cheap care in these ACOs. The 30 Pioneer ACOs have 5 different payment structures (MedPAC 4/2013 p.10). Several were publicized initially, and ACOs could suggest others (Request for Application pp.8-10):

Pioneer gets up to 50% of loss or gain, not to exceed 5% of baseline total Medicare cost

Pioneer gets up to 60% of loss or gain, not to exceed 10% of baseline total Medicare cost

Pioneer gets up to 70% of loss or gain, not to exceed 15% of baseline total Medicare cost

Pioneer gets up to 75% of loss or gain, not to exceed 15% of baseline total Medicare cost

Pioneer gets all of loss or gain, with flat payment per beneficiary per month, in years 3-5

Actual percent up to 50%-75% depends on limited quality standards as in regular ACOs.

About 35 ACOs are Advance Payment ACOs ("a" in list) where Medicare lends money to start and operate the ACO.

"If the ACO does not generate sufficient savings to repay the advance payments as of the first settlement for the Shared Savings Program, CMS will continue to offset shared savings in subsequent performance years and any future agreement periods, or pursue recoupment where appropriate." Advanced Payment ACO Model 1/10/2013 p.3

Once providers have received advance money, they will be very averse to giving it back, so pressure to generate savings will be even stronger than at the other Shared Savings ACOs, which do not have Advance Payments.

15% of people with health insurance from private employers have a flat fee per patient for each doctor, regardless of the amount of treatment provided (capitation).

Homeowners' insurance is like health insurance in that few people have big claims, and everyone wants low premiums. Companies frequently reword policies to avoid unexpected costs, and customers theoretically can compare policies, but often have gaps in coverage.Many types of non-healthcare insurance have premiums based on experience or risk. These varying premiums (unlike Medicare) give incentives to reduce claims: car, workers' compensation, unemployment insurance, FDIC, etc.. The person buying the insurance thus chooses between higher risks, claims and premiums, or lower claims with lower premiums.

Some types of insurance collect property to reduce losses and provide a disincentive to claim: car, mortgage. Many claims are inherently unpleasant, so have incentives against overuse: sickness, death, car accidents, house damage, and theft.

Some insurance companies make it hard to collect: Social Security Disability Insurance initially denies claims, and the disabled need to appeal. Car insurance is regularly rated by Consumer Reports on claims services. Private health insurance faces frequent complaints from patients and providers about difficulty getting payments. Long term care insurance has a risk of being similar, but there is too little experience to compare the insurers.

Moral hazard is the risk that an insured person or company will incur extra risks and losses because of having insurance. Banks are subject to moral hazard because of FDIC and bailout funds. However people rarely get sick or want more invasive tests voluntarily, so moral hazard rarely applies to health insurance.

How Do Other Entitlement Programs Control Costs?

Governments reduce budgets and cut services of entitlement programs overtly or covertly. Home health services and services for foster children are targeted and reduced.

Advocates limit cuts by asking voters or courts to insist on more money. Prisons are overcrowded until prisoners get courts to order improvements.

Medical care is subject to malpractice suits as an incentive against cost-cutting, though these are expensive with expert testimony, and many states restrict awards for suffering, so they are not as useful for elderly (Medicare) patients as they are for highly paid younger patients who can claim lost earnings. Class actions may be a way to aggregate enough awards to make legal enforcement worthwhile.

ERISA preempts many claims for damages against employer-provided health insurance, even HMOs, though not necessarily against independent doctors and hospitals (legal history to 2003).

An ACO gets a bonus payment of up to 50% of the cost savings from Medicare Parts A and B for its patients. (If an ACO is willing to risk losses as well as bonuses (2-sided), they get up to 60% of the savings instead of 50% 42 CFR 425.606.

The baseline for savings is past years' spending, "Parts A and B fee-for-service expenditures for beneficiaries that would have been assigned to the ACO in any of the 3 most recent years" (42 CFR 425.602(a)) based on taxpayer numbers of doctors now in the ACO. The 3 years are not averaged equally; the last year gets 60% weight, middle year 30%, first year only 10%.

The exclusion of retired doctors moves the baseline down, by excluding their typically older patients from the baseline.

The baseline omits patients who stop getting care from the ACO by choice or by death. (42 CFR 425.602(a)(8))

Excluding dead patients moves the baseline down again by omitting the typically high costs of the last year of life. Moving the baseline down means deeper cuts in current expenses are needed before the ACO sees savings.

The 3 base years stay the same for the entire "agreement period," (42 CFR 425.602(c)) typically 3 years.

The fixed baseline is updated by national rises in Medicare costs. (42 CFR 425.602(a))

The comparison is Parts A and B fee-for-service costs for an ACO's patients each year. (42 CFR 425.604)

The cost for each patient is limited to the national 99th percentile of patient costs each year, to limit the effect of the most expensive patients (42 CFR 425.602(a)(4)). Doctors expect the limit will be about $100,000 per patient, so patients costing over $100,000 will be averaged as if they cost $100,000.

Patients are included in the ACO if they get more primary care from the ACO than from any other ACO or non-ACO sources (42 CFR 425.402). Patients who get no care in a year are not included.

Medicare requires ACOs to have at least 5,000 Medicare patients. With 260 Medicare patients per doctor, this means at least 20 primary care doctors in each ACO. Most ACOs are larger. However 3-8 doctors give better care, because they take more responsibility and have fewer managerial distractions than big practices (Kussin 2011, p.36). With at least 20 doctors, each doctor has little effect on the ACO's bonus, so the ACO needs internal incentives to motivate doctors, such as reviews of doctors, limits on expensive procedures, and rewarding individual doctors for cutting their costs. Much like an HMO.